Name: Muntasir Ahmmed

Matric Numper: AIU20092093

Tutorial 2

1. What is a demand curve and law of the demand?

The demand curve is downward sloping, indicating the negative relationship between the price of
a product and the quantity demanded.

The law of demand is one of the most fundamental concepts in economics. It states that a higher
price leads to a lower quantity demanded and that a lower price leads to a higher quantity
demanded.

2. (a) Is price the only variable influencing the demand for a good or service?

No, the price is just one of the variables influencing the demand for a good or service. The
demand for a good depends on several factors, such as price of the good, perceived quality,
advertising, income, confidence of consumers and changes in taste and fashion.

(b) What cause the market demand of a commodity to increase? Explain your
answer with drafting the demand curve.

There are multiple causes for the market demand of a commodity to increase. For example, if
incomes of the consumers increase, say due to the hike in their wages and salaries or due to the
grant of dearness allowance, they will demand more of a good, say cloth, at each price. This will
cause a shift in the demand curve to the right. Similarly, if preferences of the people for a
commodity, say colour TV, become greater, their demand for colour TV will increase, that is, the
demand curve will shift to the right and, therefore, at each price they will demand more colour
TV. Again, if a price of a useful commodity decreases, the market demand of that product may
increase.
From the graph, it can be seen that the demand curve shifted from D 1 to D2 as the price of the
commodity decreases from $5 to $3 and as a result, the Quantity Demanded shifts from 12 or 20.

(c) Distinguish between an increase in the quantity demanded and an increase in

demand.

Quantity Demanded represents an exact quantity (how much) of a good or service is demanded
by consumers at a particular price. Demand refers to the graphing of all the quantities that can be
purchased at different prices. On the contrary, quantity demanded, is the actual amount of goods
desired at a certain price. An "increase in demand" is represented by a rightward shift of the
demand curve while an "increase in quantity demanded" is represented by a movement along a
given demand curve.

(d) Distinguish between a decrease in the quantity demanded and a decrease in

demand.

When the demand for a commodity falls due to an increase in the price of the commodity,
keeping other factors constant, it is known as a decrease in quantity demanded whereas when the
demand for a commodity falls due to a change in other factors other than the price of the
commodity, it is known as a decrease in demand. In the case of a decrease in quantity demanded,
there is an upward movement along the same demand curve whereas in the case of a decrease in
demand the demand curve shifts leftwards.
3. Explain what happens to the demand curve for air transportation between New York
City and Washington, as a result of the following events:

a) The income of households in New York City and Washington increase.

The entire demand curve will be shifted to right as there will be change in demand. As the
income of households increases, the demand of air transportation will be increased at the same
time. Thus, demand curve will shift to right.

b) The train ticket between New York City and Washington reduced 50%.

There will be change in the demand curve because of this incident. Since train travel is a
substitute for air travel, if the price of substitute decreases, the demand for air travel will drop.
The curve shifts to the left.

c) The price of an airline ticket decreases 20%.

There will be change in the demand curve. The entire demand curve will be shifted to right as
there will be change in demand. As the price of an airline ticket decreases by 20%, the demand
of air transportation will be increased at the same time. Thus, demand curve will shift to the
right.